Site Meter

Wednesday, June 30, 2010

Monday, June 28, 2010

Robert's List of Reasonable and Reasonably Honest Conservatives fourth Update

Recall to avoid offending too many people, I restricted my list to bloggers, pundits and politicians. I count people who call themselves libertarians. I don't to list personal friends (friends -- I like to keep them).

Greg Mankiw
Tyler Cowen
Alex Tabbarock
,strike>Jim Henley (not really a conservative. I was cheating)
Bruce Bartlett
Eugene Volokh (not reasonable re appropriate punishment of an Iranian murderer)
David Brooks (not always honest)
Reihan Salaam
Arnold Kling (not really reasonable but very honest)
Richard Lugar
Charles Hagel
Olympia Snowe (not really conservative or honest but I'm getting desperate)
Mark McClellan
Scott McClellan (not really et. but gets extra points for near honesty in a press secretary)
Richard Clarke (oh you don't think he's conservative -- read "Against all Enemies")

Andrew Samwick
Julian Sanchez
Daniel Larison.

Conor Friedersdorf (I don't know if he is reasonable and I don't even really know that he is conservative but this sure is funny).

Sunday, June 20, 2010

On a bet and with 7 minutes to spare, I post a model which has a business cycle due to inter-industry wage differentials. Aside from that the model is a standard Ramsey Cass Koopmans growth model without grown.

This is a Gauss program. It shows a dynamically stable steady state so eqilibrium is indeterminate. That is, a sunspot can affect real variables.

Over the cycle, employment, consumption and investment are positively correlated. There is a procyclical real wage even though technology is constant.

It's reasonably likely that if I try to translate this program from Gauss into English, I will find that I didn't program what I meant to program, so I will have to invent a new story to argue that it is what I meant. But it does have fun dynamics.

All parameter values are extremely unrealistic.

This is a model. Any similarities to actual business cycles in a real world economy are purely coincidental.

/* business cycles due to inter-industry wage differentials ?
Now with elastic labor supply. u=ln(c) -L, L supply based on average wage.
the lo function is to be viewed with extreme suspicion*/

bet = 2;
alpha1 = 0.69;
alpha2 = 0.7;
delta = 0.05;
sigma = 1;
rho = 0.05;
eps = 0.000001;

k = 2;

gam = bet*alpha2*(1-alpha1)/(alpha1*(1-alpha2));

/*three useful functions. lo is employment in the capital goods sector, kdot is growth of total capital
and l2 is employment in the consumption goods sector*/

theta = 1/(1-alpha2*(1-sigma));

fn l2(k1,k) = alpha2*(((bet*k1+gam*(k-k1))/(k1+gam*(k-k1)))^theta)*(k-k1)^(1-sigma*theta);
fn lo(k1,k) = l2(k1,k)*k1/((k-k1)*gam);

fn kdot(k1,k) = (lo(k1,k))^alpha1*k1^(1-alpha1)-delta*k;

/*find steady state*/

eta = ((rho+delta)/(1-alpha1))^(1/alpha1); /*l1ss/k1ss */
zeta = (rho+alpha1*delta)/(delta*(1-alpha1)); /*k2ss/k1ss */

k2ss = (((bet+gam*zeta)/(1+gam*zeta))^(1/sigma))*(eta*gam/alpha2)^(-1/(sigma*theta));
k1ss = k2ss/zeta;
kss = k1ss*(1+zeta);

"r u ok ?"

(lo(k1ss,kss)/k1ss)-eta "=0?";

/*I will do everything in ldot numerically as it is a hassle*/

fn dllodk1(k1,k) = (lo(k1+eps,k)-lo(k1,k))/(lo(k1,k)*eps);
fn dllodk(k1,k) = (lo(k1,k+eps)-lo(k1,k))/(lo(k1,k)*eps);
fn dll2dk1(k1,k) = (l2(k1+eps,k)-l2(k1,k))/(l2(k1,k)*eps);
fn dll2dk(k1,k) = (l2(k1,k+eps)-l2(k1,k))/(l2(k1,k)*eps);

"dllodk1 dllodk at steady state"
dllodk1(k1ss,kss) dllodk(k1ss,kss);

fn den(k1,k) =
(alpha2-alpha1)*((1/k1)-dllodk1(k1,k)) + sigma*(1-alpha2)/(k-k1)-sigma*alpha2*dll2dk1(k1,k);

fn num(k1,k) = delta+rho -

fn k1dot(k1,k) = num(k1,k)/den(k1,k);

/*check steady state k1dot and kdot should be 0*/
"k1dot" k1dot(k1ss,kss) "kdot" kdot(k1ss,kss);

/*make derivative matrix*/

dm[1,1] = k1dot(k1ss+eps,kss)/eps;
dm[1,2] = k1dot(k1ss,kss+eps)/eps;
dm[2,1] = kdot(k1ss+eps,kss)/eps;
dm[2,2] = kdot(k1ss,kss+eps)/eps;


"det dm" det(dm);


"denominator in steady state" den(k1ss,kss);

"kss k1ss";
kss k1ss;

k1 = k1ss;
k = kss+150000*eps;

tser = (k|k1)';

step = 0.1;
"employment wage invest cons";
do while ii <100;
k2 = k-k1;
l1 = lo(k1,k);
ltwo = l2(k1,k);

l = l1+ltwo;
w = (l1*bet + ltwo)*alpha2*((k2/ltwo)^(1-alpha2))/(l1+ltwo);
invest = (l1^alpha1)*k1^(1-alpha1);
c = (ltwo^alpha2)*k2^(1-alpha2);
l w invest c;

k1 = k1+step*k1dot(k1,k);
k = k+step*kdot(k1,k);
kk1 = (k|k1)';
tser = tser|kk1;
Teach a cook how to govern (in Italian)

Monday, June 14, 2010

Sin and the Business Cycle

Many people feel the need to describe suffering as the wages of sin. This includes the suffering of people without wages. So there are moralistic theories of the business cycle. I think that much work remains to be done in this field. The liquidationist view (google Andrew Mellon, Joseph Schumpeter and Friedrich von Hayek) ascribes recessions to Greed and Pride.

Straw man real business cycle theorists and maybe Casey Mulligan ascribe them to epidemics of sloth.

But what about anger, gluttony, envy and lust ? It seems to me that the moralistic modellers of the business cycle aren't even half done as they have only 3 of 7 deadly sins covered.

OK gluttony is easy if it is considered to be over-consumption in general and not food specific. One can say we are in recession because spendthrifty consumers spent beyond their means, are up to their chins in debt and must deleverage. Then the liquidationist logic is that if this isn't painful enough, they will just borrow again as soon as they can.

Envy has been managed. It is very obscure and unpublished, but Andrei Shleifer's first attempt to translate Schumpeter's story of the businenss cycle into math was based on fads. More generally, one can get over-consumption from keeping up with the Joneses. It doesn't matter why people went deep in debt, what matters is they are at their credit limit and jonesing.

Anger almost goes without saying. The liquidationist will not note this, but everyone else should be able to see that a large part of the business cycle is due to them. They get angry at sinful excess and smite the economy with tight money and fiscal austerity.

Hmm now lust. That is a tricky one. I think I have to turn to Andrei again and quote him (I think this is word for word)

"We have a new model of the business cycle. It starts with optimistic expectations and a rapid expansion, then there is a supply shock, followed by a period of involuntary unemployment." -- Andrei Shleifer 1983.

Needs work.

One thing I have never fully understood is why conservatives, who believe that all the smart people in the world will go on strike if we raise the marginal tax rate by 1%, think that there is endless supply of geniuses ready to devote their lives to pointless, low-paying suicide missions.

Saturday, June 12, 2010

Dear Mr McNeely

Welcome to the blogosphere. If you think it is nasty, petty, and pointless, I can provide some evidence which would tend to confirm your suspicions.

I suspect that you are under continental European influence. The clause

"One response is to simply minimize the problem" is not written completely in English.

In English to "minimize" something is to make it as small as possible. YOu use it as an exact translation of the Italian verb "minimizzare" which is correctly translated into English as "to downplay." That is you use a verb which means "to make it as small as possible" to mean "to claim it is small already." The distinction between assertions and reality is useful. It is worth being able to point out that hope is not a plan and that saying it is so does not make it so.

I will concede for the sake of argument that continental European languages are perfectly fine instruments of thought and communication, but a dogs lunch of English and (I suspect) French is a barrier to effective communication.

So to minimize the problem of cheating one would use "oversight measures." The English word for suggesting that a problem is small is "to downplay."

Your use "to minimize" as a translation of the Italian verb "minimizzare" which is a false friend. It means "to downplay" not "to minimize." This is just plain ordinary Italian and does not imply that Italians don't distinguish between claims of fact and facts. It doesn't mean that Italians have no idea what honesty is or that they don't believe in objective reality.

However, through misstranlation, this perfectly ordinary continental European verb becomes a jargon term and means of undermining the received view of language and truth. This is simply because sloppy translations are incorrect and English words are used with a meaning different from their standard English, because they sound like foreign words which do not translate the English word.

I don't speak French, but I strongly suspect that the incorrect use of "to minimize" comes from mistranslated French not mistranslated English.
I call this round of Obama vs Atrios for Obama

Atrios wrote


... the administration is pushing for Congress to support various tax breaks for new startups and small businesses so they can continue to try to sell products that people don't have any money to buy.

I think that the decline in employment by firm size shows that liquidity constraints on small firms matter. This policy will allow those small firms which could sell more to expand. There are more than 0 of them. The economy is complicated. There isn't a representative consumer and a representative firm. Even if most firms are demand limited, some are liquidity limited.

Also note that, if those firms expand output, they will hire people who will spend. Also note that the loan will be spent on some kind of investment which is part of aggregate demand.

There is a difference between the fact that the reason this year is different from 2007 is aggregate demand is lower and the false claim that therefore only aggregate consumption matters.

Finally, the main limit on policy is congress. Congress may feel differently about small business loans than about transfers to states or COBRA. The power of "small businesses" in political rhetoric can be used to get an additional stimulus which may not be the best stimulus but is better than no additional stimulus.

Friday, June 11, 2010

Dear Ben Demiero

In the future could you please refrain from mentioning Glenn Beck and hypothetical powerful "shape-shifting lizard people" in the same post ?

My impression is that Glenn Beck's impersonation of a human being is just good enough for uncanny valley. I do not want to think of the possibility that he is a shape shifting lizard.

Commenters, be nice to Glenn. I don't want any comments along the lines of "lizard-person sure, but exactly what shape shifting do you have in mind ?"

Wednesday, June 09, 2010

21st Century Communism

"The Chinese government has ... even called on companies to treat workers with more dignity."

In a radical departure from communist principles, the Chinese Communist Party has dared to ask capitalists to be nicer to workers.

I recently felt forced to admit that Karl Marx may have had an (overstated) point there. It hurt. The thought of Karl spinning in his grave is some comefort.

If there is a God, He has a Sick and Twisted sense of Humor.

Tuesday, June 08, 2010 headline and abstract person strikes again

Budget looms in Calif.

Voters are more worried about a $20M gap than the national issues that impacted other states' races.

If it were 20M they wouldn't be worried.

Also, how can a 20B deficit forecast make the front page of ? I know a billion here a billion there and soon you're talking real money, but federalism is ridiculous.
Inconclusive !

I didn't know that lie detectors could tell if a one night stand was inconclusive.

In the last two days two major figures in the South Carolina Republican gubernatorial contest have taken lie detector tests. One was candidate Andre Bauer who took a lie detector test to prove he wasn't behind affair allegations against opponent Nikki Haley and another by accuser Larry Marchant to prove he had the one-night-stand with Haley he claims to have had. His came back "inconclusive."

Mr Marchant, next time you visit Salt Lake, pack some Viagra.
Robert's List of Reasonable and Reasonably Honest Conservatives Third Update

Recall to avoid offending too many people, I restricted my list to bloggers, pundits and politicians. I count people who call themselves libertarians. I don't to list personal friends (friends -- I like to keep them).

Greg Mankiw
Tyler Cowen*
Alex Tabbarock
Jim Henley
Bruce Bartlett
Eugene Volokh (not reasonable re appropriate punishment of an Iranian murderer)
David Brooks (not always honest)
Reihan Salaam
Arnold Kling (not really reasonable but very honest)
Richard Lugar
Charles Hagel
Olympia Snowe (not really conservative or honest but I'm getting desperate)
Mark McClellan
Scott McClellan (not really et. but gets extra points for near honesty in a press secretary)
Richard Clarke (oh you don't think he's conservative -- read "Against all Enemies")

Andrew Samwick
Julian Sanchez
Daniel Larison.

Conor Friedersdorf (I don't know if he is reasonable and I don't even really know that he is conservative but this sure is funny).

* sorry for temporary removal due to careless reading prof. Cohen Cowen

Monday, June 07, 2010

Digby Says Obama is following the teachings of Herbert Hoover.

Update: Score a big one for Digby. Obama is demanding agencies identify 5% of their spending which can be cut. There is no hint that cuts will be proposed only after we are out of the liquidity trap.

The Washington Post accepts Hoover as our guide and teacher. Lori Montgomery doesn't describe any economic rationale for the cuts and asserts, no doubt correctly, that the motivation is purely partisan politics. Also she quotes only administration sources, Republicans and pro-pain advocacy groups. The Hooverite advocates praise the Hooverite proposal. No sane commentators were consulted.

The only way to reconcile Obama's new approach with economic sanity is to assume that he believes that we will be out of the liquidity trap by the time the cuts are identified and implemented. The unemployment rate will certainly still be high when the cuts (if any) are actually implemented, but the effect of government spending on GDP depends on monetary policy. The zero nominal interest rate bound is binding only so long as the Fed wants monetary policy to be as expansionary as possible, and sanity in the White House would not cause Sanity on the FOMC. However, it is obvious that politics and neo-Hooverian ideology are causing the proposal.

end update.

Update II (last thing I will ever write on Digby vs the facts ever).

I apologise the the patient reader, if there is one, and promise that I won't write about Digby again. Ever. Just above, I conceded that the latest news from the Obama administration very much supported her view that they are Hoovering. Then I made a mistake. I read another post by Digby (good move I read all of them) and I decided to note, just for the record, that when she discusses US taxes and spending she is completely out of touch with reality.

Today she wrote "the government is having no problem telling people all over the country that they are just going to have to punt because we can't afford to pay them unemployment benefits."

Google news (obviously not a resourse which interests Digby) sent me here

Unemployment Extension Bill Set To Go Before Senate Today
By Audrey Howard on June 8, 2010, 5:26 am

On Monday the Senate Finance Chairman, Max Baucus, said that the committee had almost finished putting the final touches on HB 4213. Along with the much needed unemployment benefits extension that is on the bill there is also measures to stop pay cuts in the Medicare system, extend tax breaks that are needed to create jobs, and provide funding necessary to carry on with a summer jobs program

That was literally 5 seconds of googling. I searched news for "jobs" "bill" "2010" "june" and got proof that Digby's claim of fact is false on the very first try.

OK so the news is dated June 8 like Digby's post. However, it is news that a bill is moving to the Senate floor. The House has already passed a similar bill. The accurate statement is that the Government is having problems getting checks to the long term unemployed on time. The claims that the government has no problem cutting them off and that it is cutting them off because of a perceived lack of money and not the drunken slug maximum pace of Senate action are plainly false.

Digby's statements on simple matters of fact are often plainly false. She discusses government spending but ignores bills in Congress.

I think she has a lot to contribute to the national debate. However, I think it is clear that Dibgy's claims of fact are not reliable. Embarrassingly, in spite of reading her posts daily, I don't know if she has a narrow disinterest in Federal Government spending or a more general indifference to facts. I don't care. I classify her as "all claims of fact must be checked." Once I know that someone repeatedly makes false claims of fact, I will not seek limits to that persons unreliability. Unreliable is unreliable.

I suggest to my readers (if any) that they never trust any claim of fact made by Digby. Her ideas are interesting. Her "facts" are not all facts.

Sorry for wasting your time. I promise that the word "Digby" will not appear on this blog again.

end update II

Is noting that someone overlooked over $ 126 billion being picky picky picky ?

Does noting this fact imply that Obama is to the left of Digby ?

Digby, Bruce Wilder and an anonymous commenter are not interested in a fact and my noting that fact. They don't seem to have been interested in mere facts when posting and commenting recently. Wilder and anonymous do not recognise claims of fact when they see them. They assume that if I make of claim of fact, I must be arguing for the conclusion (which comes to their head) supported by that claim of fact. The commenters clearly assume that I am indifferent to mere facticity and only note facts because I find them convenient. There is no other explanation for their inference. I know there are people indifferent the difference between fact and falsehood. I am not one of them. I assume that, in spite of their comments, Bruce Wilder and anonymous aren't either.

Digby wrote "But aside from the inadequate stimulus, everything they have said up to now is in service of the hoary old Hooverite ideas about belt tightening and sacrifice"

Not only does Digby consider the ARRA a statement not an action (obviously she is unwilling to be distracted from words by mere actions for long) but she also asserted that there was one and only one stimulus. The topic of the post was international reluctance to enact more fiscal stimulus. In this context "the stimulus" can't refer to all of the five or more stimulus bills signed by Obama. I think that Digby asserted that they don't exist. She is not interested in the facts. She isn't interested in actual Federal spending. She is so focused on language and debate and tone that she doesn't bother keeping track of events.

The stimulus bills signed by Obama include

ARRA (the one even Digby noticed).

Cash for Clunkers signed June 25 2009

Tax breaks for homebuyers (dumb but a stimulus not austerity)

The HIRE act signed 18 March 2010.

Piddling but not zero. $17.5 billion If I read correctly.

HR4213. This is the significant additional stimulus bill (it was not tiny like the HIRE act) with over 102 billion more spending in fiscal 2010 and 2011 plus tax cuts of over 26 billion.

To Digby over 128 billion dollars are nothing.

There are other bills which are not exactly stimulus spending but Hooverian belt tightening either. They include the Health Care Reform bill which Digby doesn't bother to mention. Most of it is delayed until 2004, but not quite all of it.


Veterans benefits increased Oct 22 2009

Note, yet another stimulus bill supported by Obama was passed by the House with huge cuts compared to a proposal and not yet taken up by the Senate.

As far as I know the house cuts were not supported by the Obama administration.
I note that Atrios has a clear idea who to blame
"Congress is encouraging 50 little Hoovers. It's going to work out so well."

Two commenters irritated me. One is anonymous. He or she wrote
"You owe Digby an apology." However, he or she equates the assertion that more stimulus is needed and not much more stimulus seems likely with the assertion that there has been only one stimulus bill. In support of his or her claim that I owe Digby an apology, anonymous presents proof that Digby's claim was false, just as I asserted. Anonymous quoted Brad Delong including
"We have an administration experiencing difficulty finding $23 billion to prevent additional teacher layoffs," The fact that the administration is attempting to find that money shows that its policy is not pure Hooverite belt tightening.

Anonymous is so incapable of understanding the concept of a fact that he or she thinks that this assertion, which proves that Digby's claim was false (the Obama administration proposed a bill to Congress and that is undoubtably a form of communication). To anonymous, the only thing that matters is what side you are on and you can't admit that Obama has signed more than one stimulus if you don't agree with the deficit commission on everything. This is teapartier level idiocy.

Facts are facts. A claim of fact is not contradicted by a claim of fact which proves that it is true. I can be appalled by Digby's indifference to the facts while agreeing with her on the general outlines of proper policy.

Bruce Wilder wrote "Of course, digby is more concerned about words -- words are what she does. Hers is a cultural and rhetorical critique. She tries to take economics seriously, but defers to others on that, as she should."

Look I am not demanding that she have a view on say economic theory. I am demanding that she not overlook over 128 billion dollars in stimulus spending and tax cuts due to a bill signed into law this Spring. I guess if it has to do with dollars it has something to do with economics, but if you are not at all interested in government taxing or spending, you shouldn't write about fiscal policy. I don't expect her to be an economist (or want it there are too many economists already). I do expect her to keep track of over a hundred billion dollars which was in the news in March. Writing about fiscal policy while ignoring actual fiscal policy does not seem to me to be a good idea.

Then Wilder wrote "There's nothing wrong with her appraisal of the politics of Obama's economics. Your attempt to portray it as factually or reality-challenged falls flat."

Now saying that a claim of fact "falls flat" is not a reality based response. I asserted that Digby made a false claim about stimulus bills enacted less than three months ago.

Then Wilder wrote "If Brad DeLong finds Obama drifting to his right, digby is certainly correct to see Obama to her right."

I did not in any way write suggest or ever think that Obama is not to the right of Digby. I claimed that, in her critique of Obama, Digby ignored the facts. There is no basis whatsoever for Wilder's apparent belief that I asserted that Obama is not to the right of Digby. I never said that and he insults me by suggesting I did. I think Wilder owes me an apology for criticizing a claim which I absolutely did not make.

Claims which are contradicted by facts in the public record are not OK even if one is part of the Democratic wing of the Democratic party.

My post was long, incoherent, rude, and angry. I was actually more appalled to Digby's unwillingness to think about the world outside of the USA, than by her plainly false claim about Obama and stimulus spending. I definitely did not say anything in any way contradicted by evidence presented by the commenters.

Sunday, June 06, 2010

I seem to have been bannned over at Political Animal

For days, my comments have been rejected on the grounds that I am not allowed to comment.

Comment Submission Error
Your comment submission failed for the following reasons:

You are not allowed to post comments.

Please correct the error in the form below, then press Post to post your comment.

So here is a comment in reply to another comment.

Bill H wrote

"...The "buying oil from Iran" thing is a claim that is being made by "Vote Vets" in television commercials, so why are you not calling them on that as you do Kirk? ..."


"Well, I'm sure only a mental defective would make any link between "every gallon we use means money going to Iran" and "buying from Iran.""

Notice how "buying oil from Iran" has become a statement which has some link with "buying oil from Iran." Bill H asserts that his statement is to be accepted as true unless it has no link whatsoever with reality. I think this is the most generous possible interpretation of his second comment, since the only link is that the accurate quote and the innaccurate paraphrase include the word Iran and have something to do with money.

My reply follows. By the way, I have been assuming that I wasn't really banned and that this is some web bug, but I might actually have been banned for excessive rudeness.

Bill H, you are indeed right that only a mental defective would think that, since we don't buy oil from Iran, our purchases of oil don't cause Iran to get more dollars.

Let me clue you in to some really subtle liberal words "supply" and "demand." I'm sure you've heard of them, but just in case, the idea is that, other things equal, an increase in demand for a commodity causes its price to increase.

According to this flake called Adam Smith, other things equal, increased US demand for petroleum causes a higher world price of petroleum. This is good for petroleum exporters like Iran even if they don't sell petroleum to us.

The VoteVets claim is very plausible also given the fact that the US does not buy oil from Iran.

"Supply" and "demand" are useful words. You might want to look them up in the dictionary some day.
In the old days, they used to distort the meaning of text by removing context.

Now we have gotten to distorting the meaning of context by removing the text.

I think the current discussion includes one zombie removal of the main point on the order of "Al Gore claimed he invented the internet."

Here the admirable Frank Rich includes it in an excellent, outstanding, wonderful op-ed which is based on valid criticisms of Obama's excessive respect for experts and trust in capitalists and this canard "Lloyd Blankfein of Goldman Sachs was praised by the president as a “savvy” businessman two months before the Securities and Exchange Commission sued Goldman."

OK first of all, being savvy is perfectly consistent with being a crook. Savvy is one step from sly. Savviness does not imply public spirit or even honesty.

More importantly, the point of Obama's full statement was that CEO compensation should be reformed.

The full question and answer

Q Let's talk bonuses for a minute: Lloyd Blankfein, $9 million; Jamie Dimon, $17 million. Now, granted, those were in stock and less than what some had expected. But are those numbers okay?

THE PRESIDENT: Well, look, first of all, I know both those guys. They're very savvy businessmen. And I, like most of the American people, don't begrudge people success or wealth. That's part of the free market system. I do think that the compensation packages that we've seen over the last decade at least have not matched up always to performance. I think that shareholders oftentimes have not had any significant say in the pay structures for CEOs.

Note that Obama is clearly not saying that we shouldn't ever begrudge anyone success or wealth. In particular, he went on to say that some managers have received more wealth than they earned or would have gotten if the ownders of the firm decided their compensation (as in, you know, the capitalist system in theory). His position clearly is that we shouldn't begrudge everyone who is successful and wealthy their success and wealth.

The followup question and answer

Q Seventeen million dollars is a lot for Main Street to stomach.

THE PRESIDENT: Listen, $17 million is an extraordinary amount of money. Of course, there are some baseball players who are making more than that who don't get to the World Series either. So I'm shocked by that as well. I guess the main principle we want to promote is a simple principle of "say on pay," that shareholders have a chance to actually scrutinize what CEOs are getting paid. And I think that serves as a restraint and helps align performance with pay. The other thing we do think is the more that pay comes in the form of stock that requires proven performance over a certain period of time as opposed to quarterly earnings is a fairer way of measuring CEOs' success and ultimately will make the performance of American businesses better.

My bold on "as well" which logically implies that Obama is shocked by CEO pay. And note practical proposals for reform. That is the substance of the reply. The bits about "savvy" and "begrudge" are just niceness to soften the blow.

Yet the parts which are quoted are "They're very savvy businessmen", "And I, like most of the American people, don't begrudge people success or wealth" and "Of course, there are some baseball players who are making more than that"

Part of the problem is that the interview was first reported not with a transcript but with a Bloomberg story by Julianna Goldman and Ian Katz. They didn't suppress the policy proposals entirely, but they buried them quoting "begrudge" twice before they quoted "'say on pay'" or "in the form of stock." Once they quoted the word "begrudge" all by itself removing context and building a sentence around it. This is extreme journalism, but, as far as I can tell, everyone but me and Brad DeLong accepted the lede at face value.

The policy proposal was deleted by most people who quoted Obama (including Rich in his op-ed). Instead the polite introductory throat clearing was quoted.

"Style not substance" and "words are more important than actions." are the mottos.

Dibgy and Rich are outstanding compared to most commentators in the USA. However, I think they both accepted those mottos yesterday.
I have a great deal of respect for Duncan Black and Digby. However, today he links without criticism to a post of hers which strikes me as delusional.

Digby wrote

I was having an interesting email exchange with a smart person this morning which, in the interest of killing two birds with one stone, I've decided to turn into a post. My correspondent wondered why there was an international move to neo-Hooverism considering the differences in cultures between the various European countries and the US. I replied with a somewhat glib and facile response about disaster capitalism and Pete Peterson, and he pressed for a reason why the rest of the world is on the same bandwagon, especially considering their more generous history with the welfare state. (He also mentioned that Tim Geithner was surprisingly Keynesian at the G20.)

It is indeed "glib," to put it mildly, to attempts to blame Pete Peterson for German fiscal policy. I suppose I have said something that stupid in my life, but I wouldn't repeat it on the web *after* some smart person explained how anyone from any country other than the USA must conclude that US citizens don't really believe that the rest of the world exists. I'd say that demonstrated interest in the rest of the world at about the same level shown by S.C. Sen. Jake Knotts
“We’re at war over there,” Knotts said.

Asked to clarify, he said he did not mean the United States was at war with India, but was at war with “foreign countries.”

It's clear that Knotts and Digby have very vague ideas about what's going on out here outslide of the USA and don't really feel any need to find out.

And what is surprising about the idea that Geithner is Keynesian. During his secretaryship the USA has had the most Keynesian fiscal policy in its history definitely including the new deal (WWII was not fought to help the economy although it did).

Actually, I shouldn't have suggested that Digby cares less about foreign countries than about the USA as she is completely uninterested in recent US history.

It’s an article of faith among financial elites across the planet that the welfare state is an abomination and this is a global opportunity to end it. Each culture will deal with it slightly differently --- riots in Greece, marches in France, blog posts in America. But in the end, the result, short of revolution, will be similar everywhere --- the post-war welfare state will be weakened or destroyed.

It seems to me that the post war welfare state in the USA didn't amount to much compared to the current welfare state (recall there was no medicaid or medicare then). And how can Digby be so sure that the US welfare state is being weakened or destroyed ? Did she notice the Health Care Reform ?

The logic of the second quote is that financial elites get what they want. They don't seem to be getting the kind of financial regulatory reform they want do they ? I don't know how it will turn out. I assume that derivatives trading desks won't be spun off. Without that provision, the reform would still reduce the financial elites profits and contain many important provisions which they fought. Yet none of the other reforms will count, because Obama clearly supports them, so they are not leftist and so they are just what the right wants. I confidently assert that this is the way Digby's reasoning works. I see no other possible explanation for the quotes above.

As for Geithner at the G20, I’m guessing that at a minimum, they may see the efficacy of maintaining some flexibility. Their magical thinking hasn’t gotten them to where they hoped it would ---the market hasn’t “fixed itself” at least on terms that are politically sustainable --- and so perhaps they are seeing this as a long term challenge instead of a short term cyclical crisis. I don’t know. But aside from the inadequate stimulus, everything they have said up to now is in service of the hoary old Hooverite ideas about belt tightening and sacrifice even down to giddily announcing they are going to reform social security the "right way." The re-institution of Paygo, the deficit commission, the constant lip service to austerity has led to a validation of the erroneous idea that deficits are causing our economic problems and that government needs to hold back spending to fix them --- when the opposite is true.

Look I rant and I don't deny it. Digby rants too. She violates not only logic but grammar. Note "But aside from the inadequate stimulus, everything they have said up to now is in service of the hoary old Hooverite ideas." Uh Digby, neither of the two stimuli were thngs that they said. That was something which was done.

I think this error shows that Digby cares too much about rhetoric and too little about reality. Digby can't even maintain interest in things that have been done for a full sentence. She devotes her life to arguing for progressivism. She clearly has decided that it matters more what you say than what you do.

Setting up a commission to study something is a typical way to not do anything about it. A huge (albeit inadequate) stimulus is not magical thinking. Obama's proposal to reform social security involved no cuts in the welfare state. He proposed increasing taxes paid by rich people. But that is a policy proposal and violates the left blogosphere party line that there is no problem so leftists accuse Obama of being in the pocket of financial elites because he proposed increasing rich peoples' taxes. And what is this about everything they say being in favor of austerity ? Obviously they have been arguing that the stimulus is working (as it is). They argue that it was good policy. That isn't arguing in favor of austerity.

Now note one very specific fact. Digby asserts that there was one inadequate stimulus (which was inadequate partly because it was reduced by the Senate remember Ben Nelson trimming fat frying bacon and milking the sacred cows ?). In fact this congress passed its second stimulus or "jobs bill" early this Spring. Digby just erased that from history (I write this congress because the last congress also passed a small stimulus bill). Yet another stimulus bill has passed the house.

These are bills which increase Federal spending. I think it is clear that the lip service to austerity is plain double talk. The line is always "I understand and appreciate the case for frugality but ..."

And what is this nonsense about a populist uprising. Has Digby ever checked a poll ? Most adult Americans think that to help the economy the deficit should be cut. They aren't going to rise up waving a banner with Keynes' face on it. Geithner's devotion to Keynes is out of the mainstream of US public opinion.

OK back to Europe. Here budgets are being slashed. It is agreed that it is absolutely necessary to cut the deficit by any means necessary. Notably there was not a large discretionary stimulus here. Notably, the Euro block has been growing slower than the USA.

I see three fatal mental disorders behind this appalling post. First, Digby cares too much about words. She doesn't like Obama, because he doesn't present himself as a leftist and denounce the right. Therefore she ignores what he has actually done.

Second she considers anything acceptable to, say Ben Nelson and Joe Lieberman to be roughly as far right as conceivable. Therefore, she has decided that the Obama administration is Hooverian because they haven't done things without getting 60 votes in the Senate. They can't. 50 Democratic Senators can, but they won't.

I conclude that, when writing this post, Digby was roughly as reality based as Boehner usually is. I know that is rude, but I toned it down two grades from the first name that came to mind.

Saturday, June 05, 2010

Scott Sumner meet Tyler Cowen

update: Cowen did not mix up supply and demand. I apologise.

Sumner identifies "expectations about monetary policy in the indefinite future" with "monetary policy" *and* assumes that monetary policy is not currently limited by the zero lower bound on nominal interest rates. Thoma has a reasoned criticism of Sumner whose assertions are plainly nonsense. Attempting to make sense of his claim, I assumed he identified investment with aggregate demand.

In fact, he was ignoring the current federal funds rate when discussing monetary policy and asserting that, if the Fed can't control expectations about monetary policy in the future, then it must pursue the most damaging possible monetary policy in the present. That is, he feels that an assertion that the Fed can't do it alone, since safe short term interest rates are currently approximately zero is equivalent to the assertion that the Fed can't undo the effects of a fiscal stimulus. These totally different assertions are asserted by Sumner to be just the same.

I'd say I was much too gentle with Sumner. Also, Prof. Sumner thanks for quoting me at length, linking, and pointing out a spelling error. Your insinuation that I suggested that the national accounts identity tells us something about causation has nothing to do with anything which I wrote. Readers please check. I think you will see that Sumners criticism has nothing to do with anything which I wrote.

end update:

Between the two of you, you are three fourths of the way to understanding the main national accounts identity.

Let me refresh your memories Y = C+I+G+NX

Tyler Cowen mixed up the concepts of demand and supply when he argued that uncertainty causes low investment and that this is low aggregate supply (via Brad DeLong). In the medium term, but not the short term, low investment causes lower aggregate supply. Low investment, right now, means low aggregate demand, right now. This is the strange case considered by uh Keynes in the General Theory. Cowen argues that, if uncertainty is causing low investment, then fiscal stimulus will have a "marginal" effect. This is an unfortunate choice of words, as Cowen* is also confusing levels and derivatives (that is level and marginal effect). Uncertainty implies low I and low Y for given G. It does not imply a low effect of G on Y.

Not to be outdone, Scott Sumner forgets that C, G, and NX contribute to aggregate demand and argues that a fiscal stimulus works only if people believe it will work (Via Paul Krugman and Mark Thoma). Evidently, he equates stimulating the economy with stimulating investment. It is possible he assumes that G crowds out C completely unless people believe the stimulus will work. This is, of course, nonsense. If people assume that they will pay the full increase in G with higher taxes (ignoring how the increase can partly pay for itself by increasing Y and tax revenues) then the stimulus will work unless the increase in G is permanent or G and C are perfect substitutes.

Behind the apparently diametrically opposite errors, there is a common perspective -- the only thing that matters is private investment and therefore the confidence of businessmen.

The Economist is determined not to deprive its readers of this perspective inviting both of them as guest contributors.

I think they are both really working from the sole methodological a priori that further fiscal stimulus would be bad policy so they consider any argument valid if the conclusion is that fiscal stimulus is a bad idea. I do stress the word "sole." If the distinctions between supply and demand, levels and derivatives and investment and aggregate demand are optional, then clearly nothing at all matters but getting the right conclusion. I mean right as opposed to left.

*spelling error corrected.

Update: Oh my this post has gotten more attention than I expected with links from Thoma and Sumner. I posted here rather than at, because I thought the post was venting and not ready for prime time. I was right.

pulled back from comments


I thought that Tyler had mixed up AD and AS too, when I first read his post. The usual argument is that decline in investment immediately reduces AD, and only later (because the capital stock is growing more slowly than it otherwise would be) causes a decline in AS (or AS to grow at a slower rate).

Then I read the Pindyck(?) paper Tyler linked to. In that model, an increase in uncertainty really does cause an immediate decline in AS, and not through the normal channel of slower growing K.

Every period, some sectors have a positive, and some a negative, productivity shock. If firms reallocate labour from negative to positive sectors every period, aggregate productivity stays the same over time. But if firms stop reallocating labour, aggregate productivity immediately falls in that same period.

Because there are costs to reallocating labour, it's an investment decision. An increase in uncertainty causes that investment in reallocating labour to fall (because it increases the chance you would want to reverse it next period). With less reallocation of labour, aggregate productivity falls immediately. So does AS.

# posted by Nick Rowe : 10:
NO True Scotsman would write what Mark Ambinder wrote

Number two: journalists fall victim to the tyranny of false equivalences. That is, where there is a he said, journalists feel compelled to find a she said. But sometimes, often times, stories, and facts, are inconvenient and unfair. Good journalists have to figure out when facts are contestable, when they ought to be contestable, when they're not contestable, and how best to relate to the reader the probability that one side is probably correct.

This leads to number three: journalists assume a privileged perspective that smothers dissent and critical analysis. It is, in a way, a second order criticism that one hears from the left, and it also, in a way, conflicts with the false equivalences tryranny. If journalists are to make choices and judgments, then one would assume that the expertise they claim in being able to make such judgment would not itself be labeled a pathology.

If there is a unifying field theory underpinning bias claims Two and Three, it is that journalists are not special. They do not sit atop an equilateral triangle with left and right represented as angles below.

I was commenting. I thought maybe I'd better not as he seems to be coming around, then I found out I had to register to comment so I post here.

No equilateral triangle there. You list three boring forms of media criticism. One of your replies is not like the other

"Number two: journalists fall victim to the tyranny of false equivalences. ... Good journalists have to ..." In your reply, you do not argue that the criticism is invalid. You agree that it might be valid. You agree with the journalism critics that it is a criticism as you agree that good journalists do not fall victim to the tyranny of false equivalences. So far, you seem to totally agree with the critics that journalists shouldn't so fall victim and that some journalists do so fall victim. Yet somehow, you don't accept the criticism.

Later, you assert that criticism 3 is inconsistent with criticism 2. This is only true if you take the actual version of criticism 2 which I have often read on the web and then change it to remove specificity. The criticism which I have read, hundreds of times, is that if a Democratic he says something, journalists insist on quoting a Republican she (I suspect tht the right blogosphere version of the criticism switches the D and R). The claim is not that journalists refuse to exercize any judgement at all ever. The claim that Martians kidnapped Elvis who is still alive does not get a hearing.

Criticism 2 as I recall it, is that claims by Republican politicians are always treated similarly to claims by Democratic politicians even if one of the two claims is inconsistent with facts in the public record. So not two sides to every question, but two legitimate sides to every partisan debate.

This is perfectly consistent with the original version of criticism 3 (before you generalized it so that it constradicted your distorted version of criticism 2). The original version of criticism 3 is that claims that are to the right of the Republican leadership's position or to the left of the Democratic leadership's position are dismissed. Note this allegedly includes claims of fact, including claims which are now known to be accurate.

So critique 2.5 is that the range of legitimate debate is held to include the positions of mainstream Democrats, Republicans and those in between the parties. No more and no less. I have read this claim made by David Ignatieff in roughly so many words (he did not consider it a criticism).

You write that you have read liberal critics of journalism and find their criticisms to often be trenchant. I am sure that you have read the arguments and the evidence presented to support them. I understand you don't like "obnoxious" criticism of journalism (I am quoting from your post above). I also conclude that you absolutely can't context the accusations. You don't contest them here. You just complain and then go to the no true Scotsman defence, arguing, like the critics you criticize, that good journalists don't have faults (bit tautological no?).

Wednesday, June 02, 2010

Opinions on Krugman's latest column differ. One side has a point.

Krugman wrote among other things

...what I currently find most ominous is the spread of a destructive idea: the view that now, less than a year into a weak recovery from the worst slump since World War II, is the time for policy makers to stop helping the jobless and start inflicting pain.

Last week conservative members of the House, invoking the new deficit fears, scaled back a bill extending aid to the long-term unemployed — and the Senate left town without acting on even the inadequate measures that remained.

Lambert says that Krugman should have named the people who created the conventional wisdom that the suffering of the unemployed is OK or builds character or something. Quite so. Lambert does not go on to name names. Rather he names the people who caused the financial crisis. That is entirely off topic. The question which Krugman allegedly evaded is who exactly decided that further stimulus would not be a good idea. Lambert says that if Krugman's column really asserts that this decision is the responsibility of Congress, then he it is "analytically impoverished". Huh ?!?!? Congress happens to have the constitutional authority to decide if there is further stimulus. It is neither impoverished analysis nor obfuscation of responsibility to say that those who have the power have the responsibility.

Somehow, Lambert decided that the question "Who is to blame for the fact that more isn't being done to reduce unemployment ?" is the question "who is to blame for unemployment increasing in the first place ?" Talk about "analytically impoverished." And what does Lambert propose be done to fight unemployment ? Show the country "a few CEOs in orange jumpsuits doing the perp walk." I don't know if it is obfuscation or analytic poverty to say that what we should do now is to have done something long ago back when it might have prevented the current crisis. Whatever it is, I hope Lambert doesn't convince liberal lions like Krugman to act as they would in Lambert's "different better world."

I won't even mention the attack at Health Care Reform which, according to Lambert, is the cause of people being without insurance, since everyone had insurance before HCR passed. At that point he has totally lost contact with this same worse world and escaped into paranoid fantasy.

Now will I quibble that Lambert describes the list (as marked by him) "the O.E.C.D.","conservative members of the House", and "the Senate" by writing "House conservatives and the OECD -- the only agents he names in his column." What's the Senate, Chopped liver ?

I think it is clear what happened. Halfway through the column, Lambert noticed that Krugman had not made clear exactly who he was condemning. So Lambert began marking the column up noting the fact that Krugman wasn't assigning blame. The Krugman assigned blame. Reckless bank CEOs are not responsible for the fact that the Senate (or as Lambert calls it [silence here]) didn't do anything to fight unemployment before leaving town.

Lambert has decided that noting that there is such a thing as a "conventional wisdom" is obfuscatory, because no single person is responsible for the conventional wisdom. This is nonsense. The world is large. There are many people in it. Sometimes it is impossible to decide who is to blame and often it is impossible to name all the names in a 700 word column. It is just not true that the only reason blame isn't clearly asigned is deliberate obfuscation. Some things aren't clear and simple so there is no need for obfuscation.

Oddly Brad DeLong links to Lambert.

I also assume that with all his links to Krugman, Brad were eager to prove he is not an acolyte by linking to some valid criticism of Krugman. I understand perfectly. I wouldn't want people to think of me as an acolyte of Krugman (who does have a very high opinion of himself too). I too search for valid criticism of Krugman. If I find any, I'll link to it.

Tuesday, June 01, 2010

Robert's List of Reasonable and Reasonably Honest Conservatives Second Update

Recall to avoid offending too many people, I restricted my list to bloggers, pundits and politicians. I count people who call themselves libertarians. I don't to list personal friends (friends -- I like to keep them).

Greg Mankiw
Tyler Cowen
Alex Tabbarock
Jim Henley
Bruce Bartlett
Eugene Volokh (not reasonable re appropriate punishment of an Iranian murderer)
David Brooks (not always honest)
Reihan Salaam
Arnold Kling (not really reasonable but very honest)
Richard Lugar
Charles Hagel
Olympia Snowe (not really conservative or honest but I'm getting desperate)
Mark McClellan
Scott McClellan (not really et. but gets extra points for near honesty in a press secretary)
Richard Clarke (oh you don't think he's conservative -- read "Against all Enemies")

Andrew Samwick
Julian Sanchez
Daniel Larison.